We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.

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Thursday, February 23. 2012

What kind of club is that, where half the members pay no dues? (chart via Foundry)

To mix metaphors, we believe that every citizen should have some skin in the game. It's only "fair."

Of course, from a political standpoint the Left wants all the free-loaders and dependents they can get. We all get that. (Look at what has been happening to Disability. After some time on Disability, no matter how functional, few will ever work again. It has become the new Welfare. Everybody has some disability, don't they? Nobody's perfect.) Here's a question from Bernie: Can Obama Win Re-Election by Promising Free Stuff?

Mr. Obama says he is not waging class warfare against the wealthy in America. He is, of course. His campaign slogan might as well be: ” Vote for Me … I’ll Give You Free Stuff.” This is enticing. Imagine if you pay no federal income taxes and one of the candidates says, “I’ll take money from rich people and give it to you to pay your mortgage – even if you were irresponsible and bought a house you couldn’t afford. Vote for me, I’ll make sure you get unemployment benefits for almost two full years. And, oh yeah, vote for me and I’ll make sure you get birth control pills — free of charge.

Half of our culture no longer puts death and taxes next to each other, no longer understands that Uncle Sam taking your money is a bad thing, no longer understands what angered Robin Hood and what prompted the Boston Tea Party. This half of our culture has actually reached a point that they view taxes as a noble form of patriotism and charity.

We need to start showing them how it’s affecting their lives on a daily basis. We must get people to hate taxes again and look at it as the absolutely minimal necessary evil that it’s intended to be. We don’t get there by scolding them. We get there by teaching them.

Why is the imposition of a higher tax RATE on the very wealthy and a lower rate imposed on the less wealthy in any sense "fair"? Different tax rates applied to different people is the definition of unfairness. The definition of fairness is when everyone is treated the same and everyone pays taxes at the same rate. Under a single flat rate, rich people like Warren Buffett would pay more taxes in $$$, the less rich like Buffett's secretary pay less, but everyone would pay an equal proportion of his income or wealth. That sounds perfectly "fair" to me. It should even appear fair to Buffett, since he would be taxed at the same rate as his secretary, not at the lower rate he now pays (yet seems to object to) by taking advantage of complexities in the tax code.

To argue that a higher tax rate on higher incomes is fair because the wealthy can better "afford" to pay taxes than the less wealthy is specious. Logically and objectively, we should either treat all individuals the same, and thus every person should pay the same exact same amount of tax in dollars, or else we should treat all income the same and tax all income, regardless of source, at the same rate. Taxing different people at different rates or taxing different categories of income at different rates is unfair, and being unfair, is unjustified.

As for the point raised by this post that half of all Americans pay no tax (or even a negative tax for those in the lowest tax brackets according to IRS figures), the other side to look at, beyond the distribution of taxes, is the distribution of INCOME. Individual rich people by definition earn more than individual poor people. But, if I remember the latest IRS figures correctly, the aggregate amount of income earned by the lowest earning Americans, nearly all of which escapes taxation, is around $2.5 to $3 trillion a year. That figure, again IIRC, is almost identical to the aggregate income earned each year by the top 5% of income earners who account for half or more of all federal income taxes that are collected. In other words, the aggregate income of the roughly 70 million tax filers who are in the bottom two taxable income quintiles and pay very little income tax---their effective tax rate is actually around 3% I believe, down from 6% a few decades ago---is approximately the same as the aggregate income of the 7 to 10 million tax filers who pay nearly all of the income taxes that are collected by the federal government each year.

That begs the question, why is it that two groups of people who earn roughly the same share of the total national income are treated so differently when it comes to paying the cost of running the federal government? When it comes to parcelling out the tax burden, if we're not going to treat people fairly as individuals, then the least we can do is treat them fairly as income groups, which means two groups that have the same aggregate income should pay the same aggregate taxes. It's only fair.

The 'poor' are still paying PLENTY of Federal taxes:
FICA is brutal.
Their employer is raking off 30% ish and sending it straight to government - - that's the wage that MUST BE EARNED but which is never tabulated in the W-2.

It's now so bad that most employers HAVE to send the payroll off to specialists.

INCOME TAX was only supposed to apply to the top 0.01%.

We need to repeal it. It subverts the Constitution: 4th and 5th Amendments in particular.

In the modern age VAT is the only way to go. It should be ALL VAT and ZERO income tax.

That's the system of taxation that brought America to the top of the economic heap.

Some sort of anti-Foundations tax has to be worked up: they are destroying our politics. Say a graduated estate tax that goes up as the size of the object rises. A HUGE FOUNDATION = ULTRA HUGE TAX to the Treasury.

FICA is not an income tax. It is a mandatory retirement plan that accumulates savings for workers on the premise that workers are unable or unwilling, or just not smart enough, to save for their own retirement. FICA does not directly fund government operations, although the government "borrows" the money in order to pay for its operations, exchanging the cash for what may some day be worthless IOUs. FICA funds each worker's retirement, in theory returning to him benefits whose amount is, on average, at least equal to the contributions he was required to make plus the contributions that were made on his behalf by his employer plus the interest on those government IOUs. Such retirement benefits are heavily biased in favor of low wage earners and heavily weighted against high wage earners. FICA is irrelevant to discussions of who pays how much income tax in order to fund the federal government and who is or is not paying his "fair share" of taxes.

Agent Cooper: FICA is not an income tax. It is a mandatory retirement plan that accumulates savings for workers on the premise that workers are unable or unwilling, or just not smart enough, to save for their own retirement.

Social Security and Medicare are pay-as-you-go systems. The money you put in goes for your parents' and grandparents' benefits. (The Trust Fund is intended just to even out demographic shifts.)

Agent Cooper: Such retirement benefits are heavily biased in favor of low wage earners and heavily weighted against high wage earners.

Just somewhat biased. Low wage earners have shorter life spans, generally, so collect for fewer years.

Agent Cooper: FICA is irrelevant to discussions of who pays how much income tax in order to fund the federal government and who is or is not paying his "fair share" of taxes.

As you yourself point out, the U.S. uses the payroll tax as part of the general fund, so yes it is rightly considered part of the federal tax burden. When you include all the various taxes, most people have "skin in the game".

Ben Howe: Half of our culture no longer puts death and taxes next to each other, no longer understands that Uncle Sam taking your money is a bad thing, no longer understands what angered Robin Hood and what prompted the Boston Tea Party.

As most federal expenditures are related to Social Security and Medicare, it's important to realize that to continue to cut taxes will mean cutting back these programs. Any argument against taxes should make clear the effect of such cuts.

To maintain current levels of government will require higher income tax rates, more on a par with those of the Clinton Administration, which left the U.S. with structural cash surpluses.

You can go to the Treasury's web site and look at historical debt figures. Look particularly at outstanding debt, including inter/intra governmental debt. You will see that the total outstanding debt rose each year during the Clinton administration. To say that administration produced an surplus is to ignore accounting shenanigans, that allow any administration to announce a budget surplus when none in fact exists (I'm not attacking the Clinton administration. All administrations benefit from these tricks). You will likely disagree. Any company that were to raid its pension fund in the same manner and then claim profitability, would see it's managers in jail.

Mike: You can go to the Treasury's web site and look at historical debt figures.

Yes, the U.S. had structural cash-surpluses, the unified budget was in near balance (the part you seem most concerned about), and the U.S. was on track to pay off the debt held by the public. Continuing this policy would have strengthened the U.S. financial position, shored up Social Security, and tempered the overheated economy leading up to the financial meltdown.

"the U.S. uses the payroll tax as part of the general fund, so yes it is rightly considered part of the federal tax burden. When you include all the various taxes, most people have "skin in the game".

SS is "part" of the general fund---whatever you mean by the word part---only because the SC has ruled there exists no ownership interest in the benefits on the part of workers and beneficiaries. The promise by the general fund to repay what it has borrowed from the SS Trust Fund is, according to the SCOTUS, just that: a revocable promise, not a binding obligation. However, since SS benefits represent repayments to the workers of the contributions they make through FICA, and such repayments have never been defaulted on in the entire history of the SS program, FICA taxes are not "rightly" considered part of the cost of operating the federal government. That's just your assertion, and I do not share your opinion. When the lowest income quintiles receive more than 4 times the public benefits from government spending as do the highest income groups, it is absurd to claim that the former have "skin in the game" as far as GIVING. What skin they have in the game is in GETTING. That said, I do not begrudge poor people essential services that governments can provide for reasons of decency, but please don't talk to me about "fairness" in how the tax burden is shared. The way the burden is distributed is not objectively fair. If you wish, you can start a debate of whether it is wise or desirable for the tax burden to be lop-sidded, but I do not wish to participate in such a discussion.

Agent Cooper: SS is "part" of the general fund---whatever you mean by the word part---

About 40% of the federal revenue is payroll taxes.

Agent Cooper: SS is "part" of the general fund---whatever you mean by the word part---only because the SC has ruled there exists no ownership interest in the benefits on the part of workers and beneficiaries.

It is part of the general fund, because the U.S. treats it as a unified budget. If you take out the Social Security surpluses, then it is clear the U.S. is paying far too few taxes to cover the current level of spending.

Agent Cooper: The promise by the general fund to repay what it has borrowed from the SS Trust Fund is, according to the SCOTUS, just that: a revocable promise, not a binding obligation.

It's legally binding at this point, but the U.S. could change the law in that regard.

Agent Cooper: However, since SS benefits represent repayments to the workers of the contributions they make through FICA,

Remember that Social Security is a pay-as-you-go system. The Trust Fund is just a mechanism for evening out demographic and economic trends.

Agent Cooper: and such repayments have never been defaulted on in the entire history of the SS program, FICA taxes are not "rightly" considered part of the cost of operating the federal government.

The U.S. can change benefits at any time through changes in the law. As for the Trust Fund, once that is spent down, then benefits are cut automatically to match revenues.

Agent Cooper: When the lowest income quintiles receive more than 4 times the public benefits from government spending as do the highest income groups, it is absurd to claim that the former have "skin in the game" as far as GIVING.

You might want to substantiate that claim. Presumably, you are counting Social Security and Medicare benefits, which now suddenly you consider part of the federal expense burden, while considering the payroll taxes part of the federal tax burden. How do you account for intangibles, such as the large military used to protect international trade?

Agent Cooper: The way the burden is distributed is not objectively fair.

And congratulations to President Obama, who has managed to oversee a near tripling of the official national debt from the time he gave his eloquent speech as a senator justifying his vote against a debt ceiling hike just 6 short years ago:

===

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion.That is “trillion” with a “T.” That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.

Numbers that large are sometimes hard to understand. Some people may wonder why they matter.

Here is why: This year, the Federal Government will spend $220 billion on interest. That is more money to pay interest on our national debt than we’ll spend on Medicaid and the State Children’s Health Insurance Program. That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined. It is more money in one year than we are likely to spend to rebuild the devastated gulf coast in a way that honors the best of America.

And the cost of our debt is one of the fastest growing expenses in the Federal budget. This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on.

Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities."

TruthInSunshine: And congratulations to President Obama, who has managed to oversee a near tripling of the official national debt from the time he gave his eloquent speech as a senator justifying his vote against a debt ceiling hike just 6 short years ago

Obama has only been President for three of those years. The U.S. national debt has increased about 50% during that time, but that was during the worst economic downturn since the Great Depression. The vast deficits are primarily due to the precipitous drop in revenue, spending associated with automatic stabilizers, the ongoing wars, and the extension of the Bush tax cuts.

The U.S. should have continued to pay down the debt during the expansion of the Bush years, and should have raised taxes to pay for their overseas wars (or simply avoided the entire Iraq War). Save for a rainy day. Instead, the American people decided to cut taxes and run deficits. Then, when the financial meltdown occurred, they were caught without the resources necessary to meet the disaster. Fortunately, the U.S. is in a position to borrow, or it could have been much worse.

I'll be glad to dismantle that comment for you, Zach, but, since i just did, and then erased the frazzling thing by dozing off as i was proofreading (time for my nap) and doing what i don't know but a few hundred words did disappear, it'll have to wait. Points were --ah, crap, i'm not doing that again. Later --check back. But suffice to say, your equivocation is badly misleading. And i'm no reflexive conservative nor Bush boilerplater. You have to look at spreads, I'll leave that as a teaser.

If you mean "the US is in a position to print money, then buy up Treasuries and spend that money on all kinds of stuff", then maybe that would be more agreeable.

Our credit rating was dropped. Were we truly a corporation, we would probably barely qualify as junk.

I agree Obama has only been in office for 3 years and 50% of the growth. And I'll agree those have been tough years. But let's review the facts - he SPENT a tremendous amount on his 'stimulus' that did, essentially, nothing but shift money from one pocket to another. You can argue the pockets he shifted to were 'more deserving' and I'd respond with "on what basis?"

More importantly, 50% of that growth, in 3 years? That's MASSIVE. It's astounding. It's more than Bush, who was pilloried by many (including me) for behaving like a drunken sailor.

Obama deserves much admonishment for his fiscal behavior. He deserves to be ousted, if you want to be honest. There were promises made and not kept ("if we spend this, unemployment won't exceed 8%" promises).

I absolutely agree Republicans deserve as much 'credit' for this situation as Obama (or Democrats in general), but seriously - if you assume that Congress controls the purse strings (which is a fair assumption), the only extended period in the last 50 years in which debt shrank or was at least stable was when there was a Republican Congress.

Those were very different Republicans from those in Congress today. I know that. But if you average out the amount of time Democrats have held Congress AND/OR the White House, and compare this to Republicans - 75% of the 'credit' for debt lands squarely in the Democrats' lap.

Fact is, a flat tax, fixed at 17% with limited deductions, will help fix many of the problems we face, while reducing costs of collection.

Or even no income tax and a VAT. I'm less enthralled with this, but it does put more of the onus on the wealthy - and that seems to give Progressives a bit of a thrill.

Zach, i'm in a bind and can't write yet --please check back 10-ish CST. I want to talk to about premises, spreads, uncertainty principle, and why your defense of the admin is --well --problematic. Several items in this thread --the spread between the cost of one 9/11 vs two of them close enough in time tyo promise more and more --and how this must be appended to the characterization of OIF as 'all cost'.

Also, the spread between the outcome of that war as-is and as might-have-been without the left 's takeover of DC starting in the run-up to election 2006.

aLSO, THE '700k/MONTH RATE OF JOBS LOSS' (NOW MOVING, I NOTE TO 750k AND 800k)

OOPS CAPS LOCK-SORRY)

...used to defend O's performance --is actually part of that performance --the economy started shedding jobs as soon as Pelosi/Reid/Obama troika began looking likely --the meltdown was in every way made worse by business anticipating the character of this admin.

Bush's deficits as a percentage of GDP were --until hank paulson and the goldman/obama machinations following the 2006 dem congr sweep --a third --a THIRD --of Obama's --as well as his unemploymenyt rate and that's to use O's cooked numbers --a third --and econ growth, the enabler of upward mobility that is the heart of ther free markety effect, under Bush's first six years before the O shadow fell across the nation --was THREE TIMES obama's, and that's again to use the chef's specials coming out of this admin.

These are 80/20 policy-dreiven deviations --and are not matters ''of degree'', the channels do not extend to thirds and three magnitudes, even tho adroit casuistry can make it seem so, because of the standard categories of biz reportage, starting with income statements and balance sheets jargon.

===

It wasn't a promise, but an estimate based on inaccurate economic data. The hole in aggregate demand due to the financial meltdown was much higher than predicted early in the crisis

...is the admin standard line, but it needs examination from several different angles. It is mighty convenient, for starters --in fact SO easy a mistake to admit that it will be sandbagged by any but the honest, when trying to get you to fork over an ''investment''.

But that's just the first problem with it --there's several oithers. more later --gotta go --

The Bernanke is deliberately ramping up long coupon bonds -- seriously distorting the yield curve -- another form of brutal Financial Repression -- while at the same exact time bailing out the European banks with the consequent 'miracle' profits.

These are then used to pump up Tier 1 Equity -- even as these institutions write down horrific losses on Greek waste paper.

The sundering of the Euro Zone is not any different than prior debacles as rigid exchange rates blew up under the silver or gold standard. ( Silver has BY FAR the longest track record as trading metal. People love gold so much -- they just won't trade it. And how do you buy food with gold? It's literally worth too much to trade. )

These commodities are serious factors in American production -- when they have to be imported. If rising commodity prices merely cause one part of our economy to benefit while the others suffer -- that's normal and typical.

If, however, such rises cause Americans to ship out currency by the boatload -- it's a huge drag on the economy.

And, so, we have the rise of 0bamavilles across the land -- normally under the overpass.

It escapes many, but the Fedsury can't borrow from the future -- all it does is trash the capital markets with ASSET TAXES.

On current form the Fedsury is going to hyperinflate the currency into ruin.

Launching conditions have already been met.

Yet, still, I have posters crossing over hyper-inflation with the vanilla inflation that they know of.

They are entirely different beasts.

In inflation excess money is created by COMMERCIAL TRANSACTIONS and the animal spirits of capitalism.

In hyper-inflation excess money is created by POLITICAL TRANSACTIONS and the animal spirits of politicians.

America has experienced hyper-inflation in the Confederacy and during the Revolution. The ONLY reason the North was able to clean up Lincoln's GREENBACKS was the astounding strikes out West -- particularly the Comstock Lode.

BTW, it never ran out of ore. It was the price collapse of 1873 that did in this super strike.

Even the 'smart kids' can't wrap their minds around just how HUGE Federal taxation has become -- and how many devious ways our politicians have perverted the Constitution.

Throughout the war, The Atlantic’s coverage reflected an almost exclusively Northern point of view. But nearly a decade after the war ended, the magazine offered a Southerner’s perspective, via a seven-part series by George Cary Eggleston, whose family had owned a Virginia plantation and who had fought for the South under J. E. B. Stuart.

When word first got out that The Atlantic would serve as a platform for a Confederate soldier, “there was,” Eggleston would later recall, “a good deal of not very friendly surprise.” But Eggleston’s exposition of the Southern perspective was so sensitively handled that when the second installment appeared, The Atlantic’s editor, William Dean Howells, informed him that former naysayers “had begun to sing psalms in his ears.” Franklin Sanborn, one of John Brown’s funders (and the author of “John Brown and His Friends”), even invited Eggleston to a dinner at which, Eggleston later recalled, “there should be nobody present but ‘original abolitionists’ and my rebel self.”

—Sage Stossel

===

A Rebel’s Recollections
A Confederate soldier from a plantation family provides a Southern perspective.

By George Cary Eggleston

===

(begin excerpt from mid-essay)

The financial system adopted by the Confederate government was singularly simple and free from technicalities. It consisted chiefly in the issue of treasury notes enough to meet all the expenses of the government …

We knew only that money was astonishingly abundant. Provisions fell short sometimes, and the supply of clothing was not always as large as we should have liked, but nobody found it difficult to get money enough …

We were never able to determine what was a fair price for anything. We fell into the habit of paying whatever was asked, knowing that to-morrow we should have to pay more …

The feeling was universal that the speculators were fattening upon the necessities of the country and the sufferings of the people. Nearly all mercantile business was regarded at least with suspicion, and much of it fell into the hands of people with no reputations to lose …

The financial condition got steadily worse to the end. I believe the highest price, relatively, I ever saw paid, was for a pair of boots. A cavalry officer, entering a little country store, found there one pair of boots which fitted him. He inquired the price. “Two hundred dollars,” said the merchant. A five hundred dollar bill was offered, but the merchant, having no smaller bills, could not change it. “Never mind,” said the cavalier, “I’ll take the boots anyhow. Keep the change; I never let a little matter of three hundred dollars stand in the way of a trade.”

That was on the day before Lee’s surrender, but it would not have been an impossible occurrence at any time during the preceding year …

It is impossible to say precisely when the conviction became general in the South that we were to be beaten. I cannot even decide at what time I myself began to think the cause a hopeless one, and I have never yet found one of my fellow-Confederates, though I have questioned many of them, who could tell me with any degree of certainty the history of his change from confidence to despondency …

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